Eco-taxes are a win-win. They enable us to restore a healthy environment and reward those businesses that use water efficiently.

The OECD has highlighted once again the need for green tax reform to address significant vulnerabilities in our economy and protect New Zealand's clean green brand, Green Party Co-leader Dr Russel Norman said today.

Dr Norman was responding to the latest OECD Country Report on New Zealand released today which found that tax changes were essential to remove tax distortions that favour property investment and tax changes to ensure the more efficient use of resources like water.

"Until we address the property investment bias built in to our tax system, our productive sector will struggle and our savings levels will remain recklessly low," said Dr Norman.

"Bill English continues to defend a tax system with an in-built bias for property investment over more productive investment and savings alternatives, leaving our economy vulnerable to high levels of indebtedness.

"A comprehensive tax on capital gains (excluding the family home) is a critical component of rebalancing our economy and should be a central feature of the upcoming Budget."

This is not the first time the OECD has recommended a tax on property. In fact, the Government's own task force on savings, the Savings Working Group, came out in support of a capital gains tax last year.

"The report also highlights the inefficient use of natural resources like water, leading to increasing pollution, and the risk this poses to our clean green brand overseas," said Dr Norman.

"The solution is to put a price on commercial water so it is valued and used more efficiently — an elegant market-based solution with revenue-raising co-benefits.

"Eco-taxes like a tax on all commercial water usage are a win-win. They enable us to restore a healthy environment and reward those businesses that use water efficiently."

Figures calculated by the Parliamentary Library show that a $0.25/m3 charge on water would raise $1.86 billion per year. A smaller $0.10/m3 charge would raise $746 million per year. Treasury and IRD estimate a comprehensive tax on capital gains excluding the family home would raise $4.5 billion per year over time.

"New taxes on capital gains and water would raise substantial additional revenue, broadening the tax base and enabling the Government to lower debt and live within its means once again," said Dr Norman.